1 – Transnistria changes it`s mind
BSSB.BE neweasterneurope.eu 16.11.2016
As the year 2016 began, Transnistria has joined the Deep and Comprehensive Free Trade Area as a part of the agreement between the European Union and Moldova. It seems that despite earlier objections by the Transnistrian authorities, the quasi-state has obliged itself to implement necessary reforms within the next two years in order to gain access to free trade with the EU.
However, including Transnistria into the DCFTA should be rather perceived as a concession towards Tiraspol (the capital of the breakaway region of Transnitria) made by both the EU and Moldova. There is no guarantee that Transnistria will deliver on its promises.
- January 1st 2016 was a long awaited day in Transnistria with an unconcealed concern. This was the day that the EU regulations on Autonomous Trade Preferences (ATP), which were in force since 2008, had expired.
- Thanks to the ATP Moldova and Transnistria could export certain quotas of their goods to the EU market without paying customs fees.
- These preferences expired in September 2014 following the implementation of the Association Agreement with the EU and were replaced by the DCFTA which Moldova and the EU signed. Tiraspol had not shown any real interest in participation – together with Chișinău – in the new trade agreement with EU.
- In order to give Transnistria time to rethink its policy, the quasi-state remained a subject to the ATP regulations until the end of 2015. But this came to an end under the logic that the EU cannot have two separate trade agreements with one partner.
Negotiations between Moldova and the EU on the DCFTA had started in 2012. Since the very beginning of the talks, both Brussels and Chișinău encouraged Tiraspol to join. The quasi-state did not show much interest in such co-operation as it did not want to join the DCFTA via Chișinău.
Transnistrian officials claimed that they would agree to sign a separate agreement with the EU but even to them it should have been obvious that such a move would be impossible. Transnistria, as an unrecognised “state”, cannot take part in international agreements. At the same time, Tiraspol declared that its priority is to integrate with the Moscow-led Customs Union (which is now the Eurasian Economic Union).
The EU and Moldova had hoped that Transnistria would adjust its policies as economic analyses predicted that without the DCFTA, the weak economy of the quasi-state would face an even deeper crisis. According to analysts, the expiration of the ATP without the implementation of the DCFTA would cause the “state’s” GDP to drop by an additional five per cent. What’s more, Transnistrian exports were expected to drop by seven per cent (by 25 per cent to the EU). On the contrary, after joining the DCFTA, Transnistrian export could rise by 5-10 per cent, with investment increasing by 3-5 per cent and GDP by 3-4 per cent.
In spite of these figures, Transnistria remained stubbornly against the DCFTA. For Transnistria, the DCFTA would have significant political implications as Moldova would strengthen its integration with the EU. In that case, the Kremlin’s position played a key role.
The Transnistrian political elite do not want and – even if they wanted – cannot act against Russia’s interests in the region. Transnistria is fully dependent on Russian financial support. Transnistria receives between 300 and 400 million US dollars annually from selling gas it receives for free from Gazprom. Russia assigns Transnistria $150 million per year for development of its infrastructure and social expenditures.
An important role is also played by money transfers from migrant workers who live and work in Russia. Around 80 per cent of the $270 million received from Transnistrians working abroad in 2014 came from Russia. That year, the money coming directly or indirectly from Russia helped finance huge budget deficits ($850 million, the equivalent of 93 per cent of Transnistria’s GDP).
Another reason why Transnistria argued against joining the DCFTA was its own internal politics.
- This is primarily related to the conflict between President Yevgeny Shevchuk and the largest Transnistrian company, “Sheriff” – Shevchuk’s number one competitor.
- Shevchuk had probably hoped that the expiration of the ATP without the implementation of the DCFTA could have a strong leverage over Sheriff. Additionally, the Transnistrian president was aware that joining the DCFTA would mean the liquidation of customs for goods imported from the EU (it was not required by the ATP).
- Currently, these taxes are relatively high (6-7 per cent) and enrich the budget with $35 million every year.
- From Shevchuk’s perspective, the implementation of the DCFTA would mean a stronger Sheriff and lower revenues to the state budget controlled by the presidential administration.
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